INTERNATIONAL

 

Jan 13 - 19 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

BUSH UNVEILS TAX-CUTTING PACKAGE

President George W. Bush has unveiled details of an economic stimulus package aimed at invigorating the sluggish US economy.
The package expected to be approved by Congress is worth $674bn (420bn) over 10 years.
It abolishes tax on stock dividends and brings forward planned cuts in income tax.

 

 

 

The administration said the package could lift stock prices by 10% and would create 2.1 million jobs in three years.

But the Democrats have already dismissed the measures as financially irresponsible and "an illusion" designed to favour the rich.

President Bush announced his plans in a speech to the Economic Club of Chicago.

"We cannot be satisfied until every part of our economy is healthy and vigorous," he said.

He noted the vital role played by consumer spending in the US economy and said "there are warning signs I won't ignore".

"By speeding up the income tax cuts, we will speed up the economic recovery and the pace of job creation.

"If tax relief is good enough for Americans three years from now, it is good enough for Americans today."

News of the economic plan pushed the dollar higher against other major world currencies. US shares moved modestly lower following a substantial rise on Monday.

The US Treasury said the package was aimed at encouraging consumer spending, promoting investment and helping the unemployed.

 

 

GERMANY MUST SLASH DEFICIT, EU RULES

Germany has not cut spending as its economy slowed. Germany must take action on its looming budget deficit by May 21 or face punishment, the European Commission has warned.

The dressing-down from Brussels is being seen as a humiliation for the government of Europe's largest economy but is not expected to lead to any immediate financial penalty.

It comes at a difficult time for Germany, which is suffering very low economic growth, high unemployment and the threat of strikes by public sector workers.

In the second step of a formal "excessive deficit procedure", the Commission called on EU finance ministers to join it in piling pressure on Germany when they meet on January 21.

The procedure was launched in November, after forecasts indicated that Germany's deficit for 2002 would expand to 3.8% of annual economic output - way in excess of the 3% ceiling all eurozone members have signed up to.

The Commission insists member states to keep expenditure within limits, in order to bolster investor confidence in the euro.

And Germany was not the only country to incur the displeasure of the Commission, with France and Italy both being warned over their deficits.

In its latest judgement on Germany, the Commission argued Berlin was to blame for overspending, which did not result from any unforeseen external factor.

But EU monetary affairs commissioner Pedro Solbes indicated any fining of Germany for breaching the so-called Stability and Growth Pact was still some way off.

"The regulation of the treaty does not imply any type of immediate fine," he said.

"There is a second recommendation and it is a long process."

US CHIEF WARNS BRUSSELS OVER GM BAN

Support is growing in the US to escalate a dispute with Brussels over genetically modified food, further straining transatlantic relations over trade policy.

US Trade Representative Robert Zoellick said he supported calls for action against the European Union over its moratorium on genetically modified food products.

"I personally am now of the view that we need to bring a case," Mr Zoellick said, urging that the EU be brought before the World Trade Organisation.

And he said that his position was winning support in Washington.

"My sense was that there is pretty broad agreement on this but I don't want to presume everybody else's position."

EUROZONE RATES LEFT UNCHANGED

The decision to keep the key rate on hold at 2.75% had been widely expected following last month's hefty half-percentage-point cut.

That move, prompted by mounting fears over the sluggish eurozone economy, followed more than a year of inaction on rates by the European Central Bank, despite cuts enacted by other major central banks.

Europe's economy has shown increasing signs of stagnation, but the ECB has kept rates relatively high to fight inflation, which has remained persistently high.

DROUGHT WIDENS AUSTRALIAN TRADE DEFICIT

Australia's worst drought in a century has pushed its trade deficit to its highest level in more than two years in November, as agricultural exports falter.

The deficit has increased for 12 successive months and is back over A$1bn (359m; $576m) for the first time since August 2000.

Despite the drought, the government has maintained its forecast for export growth this year.

"Given these figures, the government remains confident that the mid-year economic and fiscal outlook forecast of export growth of 2% in 2002/03 remains on track," said Deputy Prime Minister John Anderson.

"These figures point clearly to the continued strength of the Australian economy relative to our key trading partners, at the same time as the continuing importance of agriculture to the national economy," he said.

 

 

HONG KONG 'MUST ECONOMISE'

Hong Kong Chief Executive Tung Chee-hwa has warned that taxes will rise and government spending will be cut, as the territory struggles to ride out an economic slump.

In his annual policy speech, Mr Tung said Hong Kong's budget deficit was threatening to damage its economy, and that mending it was his "top priority".

"The economic situation we are facing is severe and unprecedented in decades," Mr Tung said, adding that he saw no indication of an end to more than four years of debilitating deflation.

The territory's budget deficit could exceed 70bn Hong Kong dollars (5.6bn; $9bn) this year, Mr Tung said mainly because public expenditure has been rising steadily.

VENEZUELAN BANK STRIKE HITS CURRENCY

Venezuela's currency has lost further ground, as bank staff joined the five-week-old general strike in opposition to President Hugo Chavez.

The bolivar ended down 5.3% against the US dollar on Thursday, closing at a rate of 1,594.75 to US$1, as measured by a central bank average.

IMF PITCHES DEAL FOR BANKRUPT COUNTRIES

The International Monetary Fund (IMF) has published detailed proposals for dealing with countries facing unsustainable debts.

The idea is an international legal procedure that would enable countries to suspend debt repayments while they negotiate more manageable terms with their lenders.

The proposal is intended to deal with crises faced by governments in repaying debts owed to the private sector.

IMF officials feel that such situations end too frequently with a disorderly default that harms the population of the country concerned, the creditors who don't get paid and causes instability in international financial markets.

N KOREA AGREES TO TALKS WITH SEOUL

North Korea has agreed to hold talks with the South Korean Government, at which Seoul says it will put pressure on the North over its nuclear programme.

The meeting will be the latest in a series of rapprochement talks between the two sides since their historic summit in 2000, but the BBC correspondent in Seoul says the timing is highly significant. The ministerial-level meeting will be the first since North Korea began reactivating a nuclear plant, which is believed to be capable of producing weapons-grade plutonium.

GERMAN JOBLESSNESS

German unemployment has hit a new four-year high, with another 28,000 people joining the more than four million jobless in December.

The number of people looking for work in Germany hit 4.225 million, or 10.1% of the working population, the Federal Labour Office said.

EURO RECLAIMS THREE-YEAR HIGH

Europe's single currency has climbed to levels not seen since October 1999 as the US dollar remains under pressure because of fears over a war on Iraq and the general economic outlook.

The euro hit a three-year high of $1.0535 in late Asian trade before slipping back to be at $1.0507 at 1025 GMT.

The dollar had strengthened earlier in the week as US stock markets made some gains fuelled by President George W. Bush's proposed $674bn economic stimulus package.

Central to his proposals was a elimination of taxes on corporate dividends for shareholders.

But, Wall Street started its downward trend again as traders started to fret over a number of major fourth-quarter profit statements due next week.

CORPORATE WORRIES HIT US STOCKS

Some more gloomy corporate news pushed share prices lower on Wall Street.

Widening losses at aluminium maker Alcoa and profit warning from personal computer maker Gateway weighed on the market.

Analysts also said that profit-takers were pulling the market back following the recent rally over the first three trading days of the year.

The Dow Jones index eventually closed down 145.28 points, or 1.7%, at 8,595.31.

The gloomy news from the US hit sentiment in Europe.

In London, the FTSE 100 index of leading UK shares closed down 32.6 points at 3,924.8.

In Frankfurt, the Dax dropped 3.85% to 2,993, while in Paris the Cac 40 fell 2.1% to 3,094.09.

 

 

IMF HEADS FOR ARGENTINA TALKS

The International Monetary Fund (IMF) has said it is looking forward to an "early finalisation" of a short-term deal with Argentina.

Following a meeting of its executive board, the IMF said in a statement that it had recognised "greater economic stability seen during the second half of 2002".

It added that negotiators would be leaving for Buenos Aires to start talks.

It is hoped the negotiations will lead to the rescheduling of part of Argentina's debt.

KOREA VOWS TO PROTECT ITS BOOM

South Korea has unveiled measures to protect its economy from the threat of friction with North Korea and the fall-out from any war against Iraq.

The programme, released ahead of a planning meeting for economic ministers, aims to bolster corporate investment while curbing household debt.

UK BUSINESS URGES CAUTION ON THE EURO

About half the businesses in the UK want the government to wait and see how the euro develops before deciding to join the single currency, a new survey has found.

The British Chambers of Commerce (BCC) said that 49% of firms wanted Chancellor Gordon Brown to take his time over the issue even if his five economic tests were satisfied.

The organisation's survey found that 35% would support joining the euro if the tests were met.

But 13% did not want to be part of the single currency under any circumstances.

AFGHANISTAN 'TO TOUT ITS COPPER MINES'

Afghanistan is to invite foreign companies to develop its copper mines by the middle of this year, a report on Radio Afghanistan has said.

The station quoted the minister of mines as saying the country would officially invite several international firms to submit bids for exploration by September this year.

According to Russian estimates, the area holds reserves of 11 billion tonnes, which would make it the biggest copper mining area in the world.

UK PROFITS SLUMP TO NINE-YEAR LOWS

The profitability of UK companies has fallen to its lowest level for nine years.

The Office for National Statistics (ONS) said the rate of return by private corporations outside the financial service sector dropped to 11% in the three months to the end of September.

This compared with 11.7% in the previous three months of 2001.

 

 

BRAZIL PLANS PENSION REFORM

Brazil's new President, Luiz Inacio Lula da Silva, has outlined a timetable for a reform of the pension system the biggest single drain on the government's finances.

The president has asked the Pensions Minister, Ricardo Berzoini, to have a proposal ready to be sent to Congress in four months' time.